In a competitive business landscape, companies must find ways to stand out from the competition and reward customers for their loyalty. One of the most effective ways to do this is through loyalty programs. A loyalty program is a structure or system that rewards customers for their loyalty to your brand with incentives such as discounts, points, or special treatment.
In this blog post, we will explore all things loyalty programs. We will start by explaining what a loyalty program is and why businesses should consider implementing one. Then we will discuss different types of loyalty programs and how they work. We will also look at some well-known brands that use loyalty programs to drive customer retention and revenue growth. Finally, we will provide tips on how businesses can get started with loyalty programs.
Table of Contents
What is a Loyalty Program?
Loyalty programs are designed to encourage customers to continue doing business with a company. By offering perks and rewards like exclusive products, special offers, and giveaways for a customer’s loyalty and frequent purchases, businesses can keep existing customers coming back while also attracting new ones.
Loyalty programs are used to drive revenue, increase customer retention, boost customer engagement, and market to potential customers. There are many different types of loyalty programs, but they all share one common goal: to create long-term relationships with customers.
A Brief History of Customer Loyalty Programs
Some believe that the early roots of customer loyalty programs started with “premium marketing” in the late 18th century. At this time, American retailers began to give customers copper tokens with purchases that could be later redeemed for products on future purchases.
In the 1800s, Green Shield stamps set the standard for future loyalty and rewards programs. Green Shield customers received stamps for purchases that later could be redeemed for catalog products.
It wasn’t until the 1930s that loyalty programs as we know them began to emerge. Betty Crocker box top coupons were introduced, allowing customers to save money on products they already purchase.
In 1981 the first modern loyalty program was created by the airline company, American Airlines, which introduced a program called “AAdvantage.” This program allowed customers to earn points for every mile flown which could then be redeemed for free air travel.
Since then, loyalty programs have skyrocketed in popularity to the point where they have become a staple for many businesses and industries as a way to encourage customers to continue doing business with them.
Loyalty programs today take many different forms and structures, but as mobile phones and online orders have taken center stage, most successful businesses have transitioned their loyalty strategy to mobile apps and digital platforms.
Future business success will soon depend on digital solutions for customer loyalty as customers demand greener practices and more personalized experiences.
Loyalty Programs as a Strategy to Grow Your Business
Loyalty programs are beneficial for businesses because they help to boost revenue and drive customer retention.
57% of consumers will spend more on brands or providers that they’re loyal to. Just think, how much more revenue are you missing out on without a loyalty program?
Not only do loyalty programs reward current customers for their loyalty, but they also incentivize customers to continue doing business with your company. Most rewards programs are points-based, so customers can earn points for their purchases like a game. Everyone loves to win, and loyalty programs give customers a sense of accomplishment when they gather enough points for a cool reward.
Today’s average customer also values a personalized customer experience and loyalty programs empower your business to form a connection with your loyal members.
According to a report by Motista, customers who have an emotional connection to brands have a 306% higher lifetime value than merely satisfied customers.
Loyalty programs create trust between your brand and your consumer base, for more meaningful relationships that boost retention.
Your loyalty members aren’t only more likely to spend more money with your business, but they are also 86 percent more likely to recommend a company to friends and family and 66 percent are likely to write a positive online review after a positive experience. Referrals from loyal customers are one of the best ways to attract leads and positive reviews improve your business’s SEO ranking and reputation online.
Loyalty programs are a great marketing strategy. By offering exclusive deals and discounts, businesses can entice new customers to try their products or services. And once they’re hooked on your company, they’ll be more likely to continue doing business with you while referring others to your business.
With so many amazing business benefits, it’s hard to see why any business wouldn’t want to implement a rewards program!
Read more: Boost Your Business With a Powerful Customer Loyalty Program
Traditional Card-Based Loyalty Programs
Card-based loyalty programs are the most traditional card-based loyalty programs and they have reigned in popularity for decades. In this type of loyalty program, customers receive a paper or plastic card that they can use to rack up points every time they make a purchase. Once customers reach a certain number of points, they can redeem them for rewards like discounts, free products, or other prizes.
Card-based loyalty programs are popular because they’re easy to set up and manage. All businesses need is a way to track customer purchases which has traditionally been a punch method or a simple tracking system that connects through your POS.
However, card-based rewards programs have many cons such as low customer engagement due to the extra steps required to participate. With traditional loyalty programs, customers are required to carry around a physical card which can be easily forgotten or lost. What’s more, these cards are often only valid at one specific location, so customers can’t use them when they’re traveling.
Loyalty metrics are also difficult to track, particularly with customer behavior, making personalization nearly impossible. If you want to know how often a customer is visiting your store or what their favorite products are, you’re out of luck.
Digital and App-Based Loyalty Programs
With the rise of mobile technologies, loyalty programs have become more digital and app-based. In this type of loyalty program, customers can sign up for an account online or through a loyalty app and receive a digital loyalty card. This loyalty card can be stored on a customer’s mobile device and used at any location that accepts it.
Digital loyalty programs have many advantages over traditional loyalty programs. They’re more convenient for customers because they don’t have to remember to bring a physical card with them everywhere they go. What’s more, these loyalty programs can often be used at any location, so customers can still rack up points even when they’re traveling.
App-based rewards programs also meet customer expectations, because most businesses today have made the switch to digital solutions.
Loyalty metrics are also easier to track with digital loyalty programs. You can see how often happy customers are using their loyalty cards, what products they’re purchasing, and where they’re making their purchases. This data can be used to personalize the loyalty program and offer targeted deals and discounts.
Digital loyalty programs also make it easier to engage with customers. You can send loyalty members messages and push notifications to remind them to use their loyalty cards for more personalized experiences. You can also use loyalty data to segment customers and send them targeted marketing campaigns to drive more frequent purchases.
Read more: The Pros and Cons of Traditional Card-Based Loyalty Programs vs Digital App-Based Loyalty Programs
Types of Customer Loyalty Programs
There are many different types of loyalty programs, each with benefits and drawbacks. Let’s take a look at some of the most popular loyalty program structures:
Points-Based Loyalty Programs
In a points-based loyalty program, customers earn points for every purchase they make. These points can be redeemed for benefits like discounts, free products, or exclusive offers. Points programs also often offer a special discount to sign up and include a birthday reward.
These rewards programs are the most straightforward systems to set up and because of this, they are generally the most popular among small businesses and big businesses alike. Some examples of businesses with points-based loyalty programs include:
Tiered Loyalty Programs
In a tiered loyalty program, customers are placed into different tiers based on their spending. The more a customer spends, the higher their tier and the better the rewards. For example, a customer in the highest loyalty tier might receive free shipping, early access to sales, or exclusive access to certain products.
Tiered loyalty programs encourage customers to spend more, which drives revenue for your business faster. However, some tiered programs can be confusing for clients, so it is crucial to make the terms and conditions very clear.
Some examples of businesses with tiered programs include:
Paid Rewards Programs
A paid rewards program uses a subscription model. Customers pay a monthly or annual fee to receive rewards. These loyalty programs often offer a free trial period to sign up. Customers receive rewards like discounts, free products, or early access to sales. Amazon even offers Amazon Prime Day to its members where all of their products are heavily discounted like Black Friday, but only for loyal customers.
Some examples of businesses with paid loyalty programs include:
Value-Based Rewards Programs
In a value-based loyalty program, customers can donate points or a portion of their purchase to a cause or charity. This is a great way for a loyalty program to appeal to customers who want to make a difference. Value-based rewards programs also help your business build a sense of community among your loyal clients as everyone gives to the same cause.
Some examples of businesses with value-based loyalty programs include:
Read more: The Many Types of Customer Loyalty Programs: Understanding Points, Tiers, Paid Rewards, Apps, and More
How to Get Started with a Loyalty Program
Now that we’ve gone over the different types of loyalty programs, it’s time to decide which one is right for your business. To do that, you’ll need to consider your business goals and objectives, as well as your customers’ needs and preferences. Creating a loyalty program can seem like a daunting task, but with the right planning and execution, it can be a breeze.
Here are a few tips to get you started:
- Define your business goals. What do you hope to achieve with your loyalty program? Knowing where you want to end up will help you know where to begin.
- Do your research. Take the time to understand your customers and what they want from a loyalty program. Do a survey and start tracking your customer retention analytics. Your focus should be rewarding your loyal customers so they are enticed to join the program, but you can also look to other businesses for guidance and inspiration.
- Choose the right type of loyalty program for your business. Every business is different and your loyalty program structure should support your consumer base and business goals.
- Make it personal! Personalized rewards are one of the best ways to improve a customer’s experience. Track consumer behavior and listen to what your customers request in their reviews.
- Set up your loyalty program. This includes creating physical loyalty cards or digital loyalty accounts, setting up a rewards system, and choosing a loyalty software platform.
- Set up a metrics tracking system. You’ll need to track loyalty program data and analyze it to ensure your loyalty program is effective. Hire a vendor to track your loyalty metrics and customer behavior or set up a plan to have your team do this internally.
- Promote your loyalty program. Make sure your customers know about your loyalty program and how to sign up. You can promote your loyalty program on your website, social media, in-store, or through email marketing.
Loyalty programs are a great way to boost business revenue and drive customer retention. By offering rewards and loyalty points, you can encourage your customers to keep coming back for more. With the right loyalty program in place, you can create lifelong customers and brand advocates. Use this guide to choose the best loyalty program for your business and start reaping the benefits today.
The Catch-All Loyalty Program Mobile App
Now that you know all there is to know about successful loyalty programs, it’s time to get started on creating one for your business. If you’re overwhelmed with all of the tasks required to get your rewards program off the ground, we’ve got you covered with our catch-all loyalty program mobile app: DigitalGift.
DigitalGift provides digital loyalty program solutions for businesses of any size. There is no need to develop your own app when your loyalty members can use the apocket super app on their smart devices scan at checkout.
Your business can structure your loyalty program with any system that you chose; points-based, tier-based, value-based, or a paid loyalty program, it’s up to you! Your business also has complete control over the rewards that you offer.
Our DigitalGift app is a great solution for boosting customer retention, customer engagement and increasing revenue. Our team is here to support you in your high-growth efforts so your staff can focus on running your business.
Use our Merchant Sign-Up Form to get started today! We’ll be in touch shortly to support you on all of your business’s loyalty program goals.
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